Hello, and welcome to this presentation of Billerud's second quarter report. Great to have you with us this morning.

I'm joined by our CEO, Ivar Vatne, and our CFO, Andrei Krés, and they will take us through the highlights and developments of the quarter. After that, we will as usual open up the call for questions.

With that, we are ready to start. Ivar, the floor is yours.

Thank you, Lena, and good morning, everyone. Thank you all for listening in to our presentation this Friday morning.

In many aspects, it's been a quarter where we have seen progress across several areas, and it's certainly been a good step in the right direction for us. Let's get into it, next slide, please.

As expected, our Q2 result was a clear improvement versus the first quarter. North America had a very strong sales quarter with FX-neutral net sales up 11% versus year ago, which is another testament to our attractive US position, offering local supply.

For Region Europe, the main focus over the last months had been on improving profitability, and that is exactly what we managed to do now in Q2, and our performance is stronger and improved, both when we compare to last year and versus Q1. I'm naturally pleased to see this as we mobilized the organization early in the year to move us forward.

Decisive actions on pricing, reducing both fixed and variable costs, and driving a more profitable mix are now yielding results. Focus on working capital is another clear priority for us, and a 97% cash conversion during the Q2 is another good performance.

Next slide, please. We have a clear philosophy to focus on the items we can control and drive continuous improvement, and in that regard, our fixed cost-saving program is proceeding well and according to plan.

We recorded 150 million SEK savings now during the quarter, and that is 50 million incremental from Q1. All staff reductions are now completed, and in Q2, we did have the first quarter with a leaner organizational model and somewhat simplified ways of working.

I do like to take the opportunity to thank the whole Billerud organization for showing agility and determination to deliver on the standards we expect. It certainly has been an important building block to improve both our productivity and competitiveness.

In this program, we expect the benefit for '26 to land in the area of 550 million SEK, with further 250 million SEK to be delivered in '27. Next slide, please.

Another very important company priority is to evolve our portfolio gradually towards packaging materials in North America. We are picking up sales momentum after a long period of trials and qualification, and it is in particular true for our liner proposition tribute.

The interest in our coated liner has so far exceeded our expectations, and we are now expanding our offering also to include uncoated liner. We will do some selective capex investments now during Q3 to further strengthen our production capabilities within the area, and there is no doubt that we also expect further sales acceleration into the second half of the year.

Now, over to some words about the market sentiment, next slide, please. If I start with North America, the market conditions, they remain favorable and stable.

Now, the overall consumer sentiment in the US, it did take a hit post the crisis in the Middle East. Far, within our categories, Q2 was another quarter with good demand.

Our order books are strong, and we are expecting to see operating rates above 90% going into Q3. If we change over to Europe, the market sentiment is a bit different.

Overall, it has been muted. We are starting to meet different conditions between our sales channels.

Within food and beverages, conditions have improved and are starting to normalize. Luxury still weak, while the industrial channel also has improved during the quarter, and in some sense is starting to normalize.

Lastly, some words about Asia and rest of the world. The situation has also improved slightly during the quarter.

Food and beverages, and that means for us mostly liquid packaging board, that has performed surprisingly well during the first 6 months of '26 and has reached normal conditions. Also within the industrial channel, where our exposure is mostly found within the sack, the sentiment has strengthened a bit during the quarter.

With that, I will hand it over to Andrei.

Thank you, Ivar, and good morning, everyone. Starting with our net sales, which were down 2% versus year ago, and this was driven by the pricing development in Europe.

Sales volume for the group were in line with the last year, with North America up 7%, while the European volumes were down close to 3%. Currency continues to have an impact on both our topline and profitability, as we have stronger Swedish krona compared to Q2 last year.

Next slide, please. The profit decline versus last year was driven first and foremost by price pressure in Europe and loss of emission rights.

Now, most of the impact was offset by our decisive actions to reduce costs, our volume growth in North America, and pulpwood cost relief in the Nordics. Our EBITDA margin of 7% was a clear improvement sequentially, given we also had heavier maintenance schedule now in Q2.

Excluding the impact from maintenance shutdown, adjusted EBITDA increased with 4 percentage points versus quarter one. Next slide, please.

Moving over to regions, and first of all, I'm very pleased to see that our actions to improve profitability in Region Europe are yielding results, as we see improved profitability both sequentially and versus a year ago. We did see sequentially lower volumes across most categories, but clearly, that impact was more than offset by our pricing and mix actions, together with cost reductions.

Pricing was up with close to 1% versus quarter one, and we expect additional pricing carryover into the third quarter of 1% to 2%. In terms of input costs, as expected, we had significant pulpwood cost relief compared to previous quarter, partly offset by cost inflation due to the Middle East crisis.

Looking into the third quarter, we have solid order books, which are partly supported by the seasonal impact from temporary capacity adjustments in the Nordics. As Ivar mentioned, the underlying demand remains somewhat muted.

Now moving over to Region North America, North America continues to enjoy favorable market conditions and had the highest sales volume since late '22, with more than 250,000 tons sold in the quarter. Sales grew both within graphical and label paper, while pulp sales were slightly down compared to last year due to Quinnesec maintenance shutdown.

The positive volume development means that we now operate at considerably higher operating rates, which were above 90%, and we expect that level to also continue into Q3. The biannual maintenance shutdown at Quinnesec was slightly more expensive and had approximately 50 million higher cost impact, which was related to some startup challenges.

The mill performance has progressed throughout the quarter, and we are now back to strong operational performance. For the third quarter, we expect the favorable market conditions to continue, and similarly to Europe, we have strong order books.

The price increases that were announced earlier in the year will now fully materialize in quarter three, and we expect a positive pricing impact of 2% to 3% for the region compared to the second quarter. Next slide, please.

Turning over to some comments on the cost development, and first of all, in the second quarter, as we expected, for Europe, we saw continued pulpwood cost decline and also seasonally lower electricity costs, which contributed positively. That impact was partly offset by cost inflation on most and foremost logistics due to higher oil prices.

All in all, we had a sequential cost relief of approximately 150 million for the region in line with the expectations. For North America, we saw likewise cost inflation related to higher oil prices, which impacted fiber, chemical, and logistics costs.

Energy costs were somewhat lower due to seasonality, and overall, the input costs were down approximately 20 million compared to the first quarter. Next slide, please.

Now looking forward, for the third quarter, we expect overall flat input cost situation, but clearly, due to the events in the Middle East and volatile oil price, it is somewhat unpredictable environment. For Europe, we still expect further pulpwood cost relief, although the decline is now flattening out.

At this point, we expect both lower pulpwood costs and seasonally lower electricity prices to offset the cost increase we will experience on chemicals. We would look at the total sequential cost relief of around 40 million for the region.

For North America, we expect input costs to increase somewhat into quarter three, but here we are talking about quite small increases with the total negative impact of around 20 million. With that, I will hand it back to you, Ivar.

Thank you, Andrei. Some comments on cash flow and balance sheet, and as already mentioned, cash conversion now in Q2 was another solid performance with close to 100% conversion.

Our balance sheet remains healthy, and leverage ended at 2.2 after the dividend payout was executed during the quarter. Our capex guidance remains unchanged for '26, and we are planning to invest 2.6 billion SEK.

Most of the strategic capex is related to project Evolution in North America, and we do expect that program should be close to completion by the end of the year. We will get back with capex guidance for '27 in conjunction with our coming Q3 report.

Now so to round it up, and next slide, please, and closing remarks on the near-term outlook. For Q3, we would expect continued favorable conditions in North America.

The situation for Region Europe is a bit more uncertain and unpredictable, but we are seeing some positive momentum, at least within selective channels. For both regions, we will see positive pricing impact now in Q3.

With that, I hand it back to Operator for Q&A.

Yes, hi, everyone. It's Johannes here.

I have a question, Ivar and team, on your comments on positive pricing. Did you say on the call what kind of price magnitude we are talking about or does that remain to be seen?

It would be very helpful if you could sort of give us some indication on the magnitude there, please.

Yes, good morning, Johannes. As we announced price increases broadly during the first quarter, and they are now materializing.

We did see some pricing impact in Q2. Heading into the third quarter, we expect for Region Europe additional pricing impact of 1% to 2% compared to the second quarter.

For Region North America, a pricing impact of 2% to 3% compared to the second quarter.

Very helpful. Thank you.

Then on your comment about strong order backlog, how should we interpret that, first of all, if you can expand a bit what you mean with this in terms of periods of order backlog and so on? Do you think this will materialize in sort of better mix quarter-over-quarter and also higher volumes quarter-over-quarter?

Good morning, Johannes. I can start, and maybe Andrei chip in at the end here.

The way we would look at this is that North America had a pretty solid quarter in terms of sales volume. We would expect that to continue also into Q3.

We are operating now in the 90%-ish operating rates in North America, and that we expect to continue now in Q3. We had some maintenance shut in Q2 in Quinnesec, and we will have Escanaba now in Q3.

In that sense, still going strong. The mix question there in North America is we had a bit lower pulp sales in Quin.

That we would expect to pick up now since Quin is back to full blaze, and that typically has a bit of a subdued margin, there might be some small negative impact on the mix in North America. For Region Europe, it's a bit of a mixed bag, but in general, order books are very strong, and we do expect to run a pretty solid production pace now going forward.

We probably would expect some pick-up in terms of the volume, but we might see some offset since in this quarter here now we would expect to sell a bit more than we produce, and part of that volume uplift could be offset by some fixed cost absorption. In general, good order books and good production pace is also the case for Europe in Q3.

That's great. Thank you.

Thank you very much, and good morning, everyone. You talked about somewhat improved market conditions in Europe.

I wonder if you could shed some more light on that possibly, which segments are we talking about, and how do you interpret that? Is this part of an inventory cycle, or is it your view that we are seeing some real demand improvement, some more constructive customer behavior out there?

Good morning, Linus. I can start with this.

It's a good question, first and foremost, and I think the honest answer here is that I think we continuously ask ourselves that question, and I'm the first to admit we probably need a bit more evidence and months under our belt to really feel that this is a longer trend. I can just confirm that right now, we are seeing better demand in food and beverages.

As that's our biggest channel in Region Europe. Liquid packaging has been strong from pretty much the beginning of the year, and we're pretty confident that will keep up at least into Q3.

For containerboard, I think also we see a pretty okay situation. Fluting pretty much is fully sold out in terms of our machines going forward.

There's a nice pull from our strong position in Latin America given our product performance on this Billerud flute. Liner is a bit weaker, but still it's holding up better than maybe we thought 3 months ago.

Luxury, and for us that means a lot of the exposure to cartonboard, is still the weakest part that has been weak for some time, and I think we don't expect much change on that. Certainly also this is an area that has a lot of overcapacity.

We're doing better than others on brown, but on white carton and FBB, it's still a pretty, yeah, muted and weak situation. I think for paper, sack now is clicking in quite nicely into gear, and we have more pull now on brown sack than probably we had for many quarters.

We certainly also sold out on that piece. Maybe somehow a bit of a surprise.

We see that industrial channel has picked up. That's not only in Europe, but a lot of the regional exposure we have on brown sack is found in Middle East, North Africa, and also into Asia.

That has been better, yeah, than what we've seen for some time. White sack is a bit muted, but still better than maybe it was.

Kraft paper, in this case MG and MF, is still a little bit softer than we see on sack, but also a bit of an uptick versus what we saw for the last few quarters. I think, if you sum it up, it's still not fully back to maybe the old, let's say, sentiment that we had, 2% to 3% category growth consistently.

It's certainly now a step in the right direction, and we are seeing, for some time now, better pull on many of the channels we have exposure to.

Interesting. Because that improvement is not visible in your Europe shipments numbers for the second quarter.

I guess what you're alluding to here is that we will see a pickup in Europe shipments volumes in the third quarter. Are we back to year-on-year growth in terms of European shipments in the third quarter?

No, I don't want to comment necessarily that. We also had some maintenance shuts in the quarter that impacted if you think quarter-over-quarter.

I can confirm we are expecting a volume uplift now in Q3 versus Q2, although that impact, as I mentioned also on the previous question, would be a bit more reduced given the impact that we expect a bit bigger impact on the fixed costs absorptions as we would expect to sell a bit more in the quarter versus production. In general, the underlying sentiment still remains that we should have a better sales volume quarter in Q3 than Q2 for Europe.

Great. Then just finally, also on the market situation, but in North America, you've had a fantastic recovery in terms of operating rates over the past several quarters by now.

With regards to trade barriers, etc., and your very special market position, could you just give us the snapshot here and now with this kind of operating rates? What's the trajectory of profitability, pricing, etc., from here?

Do you see how is this tariff dynamic working out in your market segments in the US? Yeah.

I think the situation has been favorable in North America for some quarters and certainly has been a phenomenal performance over years now that we've got used to from our colleagues in Michigan. We expect that going forward.

I think so far in '26, graphic paper has been outstanding, and surprised us also a bit that it is a category in secular decline as you know. I think so far this has hold much better, and it might actually be right now on more flat category development.

That is not something we would expect as the new normal. There is clearly been some big events now with both the World Cup and also the midterm election that is, in some sense, pumping some extra energy into the category.

We have a great position. We are one of the few remaining locally produced suppliers, and I think our value proposition of predictability and reliability and a near-term partner is really paying off.

Graphic still going to be the cornerstone of that for some time. I'm repeating myself, it is in secular decline, and we have other legs to stand on.

Our label paper is also one of that, and there we see more favorable conditions and growth of 1% to 2%, and there we have a leading position for some time, and we expect to have that. Then we do come back to the point around our journey to gradually go into packaging materials.

Yes, there's numbers are still in what call it as a scale-up or startup mode, but we are getting now to the point where more and more of our qualification trials are turning into successful and tangible results, and that momentum should go forward. I think we would expect strong performance for the, call it, foreseeable future in North America.

Input cost situation is much more stable than in Europe. I think we come now with pricing in Q3, that will also take a good step into the gross margin.

Operating rates should be on the higher side for at least some time going forward. That's our best estimate right now.

Great. Many thanks.

Good morning. Thanks for taking my question.

I'd just like to follow up on the comments that you made in your statement about evaluating all opportunities to play an active role in addressing the industry challenges. I know the market is very difficult, and that comment leaves the scope open for footprint rationalization and M&A.

I'd like to ask on the M&A side, do you also take the view that with a bigger footprint, it's easier to reallocate volumes, and it's easier to close capacity when you have scale? I'm just wondering if M&A is on the table, and how you think about it within the industry.

Hi, good morning, Cole, and I can try to add some comments on this. I think what we're trying to say with the statement is that although now we are seeing a bit improved sentiment, at least also in Europe, it doesn't take away the fact that it's still a pretty unbalanced situation.

We are not very optimistic on the long-term view of the competitiveness of the region unless we see some structural change. I think I would have a pretty broad-based support, I think, from my sector colleagues on that statement.

You can do many things to try to make some interventions here. You can do it alone, you can also do it in a bigger context.

I think what you mentioned on M&A, I think everything is on the table. As far as I can go today says that we are allocating quite a bit of time on that, both within the management, but also in terms of our dialogue with the board, to see what really is going to be position going forward.

That's pretty much I guess as long as I would like to go on that statement.

Sure. Then maybe just following up on the volume commentary.

The deliveries of 610,000, it is quite low compared to history, and I get it that the market's challenged. You've got really good operating rates in North America, whereas the operating rates in Europe are more challenged.

Do you think that this is an element of you need to right-size your asset base to kind of address the volume gap? If we look at 2025 volumes of 2.5 million tons versus going back to 2020, 2021, 2019, there's a 200,000 to 300,000-ton gap, which is an entire paper machine.

I'm just wondering, is the asset base still fit for purpose, or are you going to need to take some actions there? Thank you.

No,

I think it goes straight into the first point where, yeah, us and the whole sector is running below where they would need to run. It is a very capital-intensive sector where you are almost in some sense dependent on having a very high utilization to make solid financials.

We share the view that it is too much capacity versus now what the market looks like, and with some of the X factors we met over the last years. That applies to us, and it applies to pretty much the whole sector.

I can only say that although we see a bit of a step up into the right direction, the fundamental challenge that we see now in sector is not going away anytime soon. Then

just to follow up to end it on more of a positive one, which is the kind of the order books better into Europe into Q3. Do you think there's been any kind of increase in or restocking or supply chain pull-forward?

My channel checks indicated there was some in containerboard, but I hadn't really seen anything in sack or specialty kraft or folding carton. I'm just wondering if there is any restock or kind of customers wanting a little bit more inventory for safety.

Anything to explain the better order books from your side or restocking would be helpful.

That's another question that we try to stay very close to our customers to get the best intelligence out there. I would have had some of the same fear during second quarter, in particular when we know going back to COVID what happened and when the Middle East crisis happened and, of course, the natural reaction is that will we now see something similar.

I think what we've seen though is in Europe there hasn't been much, you can call it disruption, at all. I certainly don't expect that to have been in any way impacted with some extra safety stock.

Intuitively you can say that everything that goes to Asia might have had some impact given supply chain in that passing by that region is a bit sketchy. What we have seen is that not much is coming our way of a need to the safety stock.

Another piece that tend to be a good indication is we're coming with pricing that is starting to hit from the 1st of July, that can lead in some cases to customers stocking a bit up before. Order books are strong.

They're very solid also going into Q3, so that's also not what we're saying. At least to best knowledge, the stocking impact that we should have seen over the last months should have been very limited.

Thank you.

Yes, good morning. A question on pulpwood.

At the start of the year, you gave a number of 900 million in cost benefit to you from a price decline. How much have wood costs dropped since then, and how much are you expecting now?

Yes, good morning, Martin. I think if we look for the full year, and the 900 million was really based around our view or expectation that price per cubic meter would be roughly 100 Swedish krona per cubic meter lower in the year.

This is still our expectation for the full year. This is on that trajectory that we have been now for the first half of the year.

First half of the year, we have had roughly half of it in terms of profit uplift.

That is still what you see? There's no further decline from the 100?

No, not at this point.

Okay. Then a second question.

You have announced 6% to 8% on sack kraft and coated fine. Have they gone through, and does that mean that there's more price increases for Q4, or has that happened in Q2?

In terms of the price increase, the announced price increases were communicated both during quarter one and quarter two. They have gone through, they are being implemented.

As there's a variation between how much we get through within the different regions and areas. Those are now fully in the guidance that we provided in terms of price increases of 1% to 2% for the region into Q3.

Good. Last question on volumes.

You gave this comment that volumes will be better, that the fixed cost absorption will be lower. Does that mean that you produce more in this quarter?

Yes, we do.

Thank you.

Good morning. Two questions left from my side.

One is on the chemicals cost, which you're now saying is going up. Obviously that's related to the higher energy prices.

My question is how quick is that energy impact into chemicals? If we see energy prices come down sort of now, let's say in the coming months, would that quickly translate into lower chemicals prices as well for let's say Q4 and into next year?

That's the first question. Then the second question is you're describing an overall market situation which seems to have fairly quickly improved with good order books also in Europe and fairly good seems demand in export markets.

Do you believe there's further room for price increases even without any structural actions in the industry? Those were my two questions.

Yes, good morning, Oskar. I will start with the question on chemicals.

In terms of the inventory turnaround to just start with, it is somewhat faster than we have for our fiber inventory. It goes quite quickly.

It's mostly really dependent on the contract structure and how often we renegotiate the contracts for the chemicals. I would say that, as a guidance, it would probably be a quarter ahead that we would see the price impact on chemicals to come through the P&L.

Good morning, Oskar. I can take the second.

Yes, it's a good question. It's tough to give a very good answer on this, but I'll give it a shot.

We need to come at this from slightly different angles, but one angle is if you think about what at least within Europe, what is driving a lot of the pricing push on the virgin fiber, and it tend to be within the recycled, who's starting this, you can call it circle. There is also in some sense a bit of an unhealthy balance on recycled.

There's a bit too much capacity that we also see there, that tend to be a bit more strain on ability to price up. Much more for the recycled players than what we see here up in Nordic with integrated pulp mills is that they're very depending on energy costs, especially on the gas prices, and clearly they spiked post what we saw in the Middle East.

The million-dollar question is what's going to happen with that going forward. Clearly, it's lower now over the summer, but when you go into the fall, if they will stay and we will see oil prices and gas pricing being elevated and maybe even going a bit further, I think the likelihood is that we will see another wave is high.

Not something necessarily that we are counting on, and clearly we will obviously seize any opportunity we have, but that could very easily happen. It can also happen the other way if we start to see that there is more stability and all are coming into more historical levels, you might very fast expect to see some mechanism that goes the other way.

That's probably the best answer I have for you right now.

Great. I think that's a great answer.

Thank you. Those were my questions.

Morning. Thanks for taking the follow-up.

I'd just like to ask on the European Commission putting in some protectionist measures from the likes of Shein and some of the Chinese products that are coming across cheaply on the internet, on the e-commerce platforms. I'm just wondering, Do you think this will be supportive to the European packaging industry, and is this supportive to Billerud ultimately?

Does this mean that we're going to have a little bit more goods and supply chains using the European packaging papers? Thank you.

I can take that one. As a starting point, I think we in Billerud, we are in very favor of, call it, free trade or a pretty open trade relations.

That's what we've seen for a lot of decades, and that's been good for us. I guess what we're seeing now, and we're starting to see a trend which is starting to be more regionalized, seen in North America with what they've done over the last let's call it quarters and years, is starting to be a big issue since a lot of the installed capacity in Europe and Nordic was calibrated for that.

When we also then play on the other premise that Asian players are ramping up and they have ramped up a lot of the capacity, and we will start to meet more intense competition also in Europe, I think we just want to make sure that we are meeting that on fair terms and conditions, and don't see Europe as an anti-dumping scene as we've seen in other categories. We don't necessarily have a strong position that we don't like Asian exporting to Europe.

I think that's the natural evolution also of what the sector has done in Asia. For example, we have a pretty sizable export into Asia from our Nordic mills, and clearly we expect that to continue, and then you also have to accept that there's a wind coming the other way around.

As long as it's done on call it terms which is fair and comparable, and not necessarily subsidies and support underlying that makes Europe an anti-dumping scene, we are okay with this, and I trust now that EU starts to wake up to the reality and notice that, hey, the world has changed, and we also need to look after our region and make sure that we get access to the same competitive and fair terms. That will be our position that we will pursue and support.

Maybe just following up there, just to understand how Billerud might benefit. If we take the view that the e-commerce platforms set up, let's say, European-based fulfillment or repackaging hubs, that should ultimately help drive a little bit more demand for European boxes or even mailer bags, etc.

I'm just wondering which segments of Billerud might benefit from using more a shift to EU retailers, manufacturers, and kind of fulfillment and repackaging hubs. Would it be your kind of containerboard business and sack and specialty?

Which segments would be the beneficiaries?

Natural would be containerboard, and it would be within our kraft paper, in particular on the MF side, where we have a pretty good leg to stand on already today on e-commerce. That's been growing, and I think the MF in particular would be where I would point to.

That should be something that would get an uplift.

Thank you.

Thanks for taking my follow-up. Coming back to wood costs, you're guiding in Europe for net cost tailwind of 40 million in the third compared to the second quarter.

How much is wood cost tailwind? Also, sometimes we talked about the inventory impact from revaluation.

In this context, is any such revaluation included in guidance, or is that on top, and if so, how much? Thank you.

Hi, Linus. Pulpwood stands for most of that sequential cost decline of 40 million that we expect.

We will have some minor increases on chemicals as I talked about, but they will be offset by the lower electricity prices. Most of it is actually pulpwood.

I think in terms of inventory revaluation, obviously we are coming in a stage where quarter-on-quarter the impact becomes less evident and smaller due to flattening out decline. It is included in the guidance, and it should be pretty much flat heading into Q3.

Great. Thanks for that clarification.

Thank you. That concludes our presentation of the second quarter report, and we wish you welcome back in October for our third quarter report.

Thanks for joining us today, and goodbye.